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The secondary market for real estate and infrastructure funds in Germany is no longer a quiet corner of the investment landscape—it’s fast becoming a key battleground for institutional investors grappling with rising interest rates, inflation, and shifting regulatory pressures.
A new study by Fondsbörse Private Markets and the CFIN – Research Center for Financial Services at Steinbeis University highlights a growing appetite for secondary market trading, particularly in infrastructure and real estate funds. While experience in the market remains limited, the potential for growth is undeniable.
Institutional investors are increasingly recognizing the flexibility and liquidity offered by secondary markets as they reassess their portfolios. According to the study, 43% of investors find secondary market trading very attractive, while 54% believe the market’s importance will grow in the coming years. Despite this optimism, a staggering 78% of respondents admitted to having little to no experience with these transactions, underlining the need for market education.
Fondsbörse Private Markets, a regulated marketplace for trading illiquid assets, stands poised to benefit from this shift. As Alex Gadeberg, CEO, emphasises, “Many investors simply lack experience and familiarity with the mechanisms of secondary market trading. We see considerable potential for development here.” The opportunity for growth is clear, but the challenge lies in bridging the knowledge gap.
Infrastructure funds leading the charge
One of the study’s standout findings is the pivot away from traditional real estate funds toward infrastructure investments. While 97% of institutional portfolios still hold real estate AIFs, 64% of respondents plan to boost their infrastructure investments, with only 27% focused on expanding real estate allocations. This shift reflects the evolving market dynamics, as infrastructure becomes a strategic priority for many institutional players.
Larger investors, those with assets over €2.5 billion, are particularly drawn to infrastructure, with 65% highlighting it as the most attractive asset class for secondary market trading. By contrast, smaller investors continue to see more value in real estate funds, with 46% prioritizing them over infrastructure. This divergence shows the varying strategies across the investor spectrum, as larger players look to diversify into more stable, long-term assets like infrastructure, while smaller investors stick with real estate’s established returns.
Market and regulatory shifts creating opportunities
The combination of rising interest rates and ESG criteria has forced institutional investors to rethink their portfolio strategies. Secondary markets offer a way out, allowing investors to reallocate without the complexities of direct share redemptions. “The secondary market offers an attractive option for reducing positions without directly redeeming shares in special AIFs,” Gadeberg said, noting the increased interest from both buyers and sellers in real estate funds.
41% of investors see the secondary market as a viable option for selling fund units, driven by factors like strategic asset reallocation (76%) and portfolio quota overruns (73%). The study suggests that as investors become more comfortable with secondary market mechanisms, liquidity will improve, offering more opportunities for both buying and selling.
Legal certainty and transparency still crucial
Despite the growth potential, institutional investors are clear about their conditions for participating in the secondary market. 77% of respondents stressed the need for legal certainty and regulation, with product transparency (65%) and accessibility (58%) also ranking highly. Larger investors prioritize discretion (94%) and neutrality (92%), while smaller players focus more on user-friendliness (74%) and speed of processing (68%).
This shows that while interest in secondary markets is rising, the choice of trading venue will be driven by stringent requirements for safety, clarity, and ease of use. Fondsbörse Private Markets, with its regulated platform, seems well-positioned to meet these demands.
The study underscores a critical challenge: 73% of investors haven’t yet felt a need for secondary market transactions, suggesting that while the market is ripe for growth, it remains underutilized. The key to unlocking this potential lies in education and market-building efforts that make the advantages of secondary market trading more widely known and understood.
Markus Gotzi/Robert Forster
Markus Gotzi, editor-in-chief, Der Fondsbrief
Markus Gotzi is editor-in-chief of the trade journal ‘Der Fondsbrief’, the newsletter with the highest circulation in Germany that focuses on closed-end investment models and real asset investments. Published every two weeks, it explains specific offers and reports on industry news. In Gotzi's view, trading in shares and other securities has become an important mainstay of the financial markets - and as such, it should be taken for granted. "The aim should be to establish the advantages of regulated, forward buying and selling for real assets such as property and infrastructure too. A liquid market would make all parties less dependent on developments, as we have seen in the property market, for example, over the past two years.
"Of course, certain peculiarities do need to be taken into account. Transparency, an important prerequisite for regulated trading on other exchanges, can be counterproductive among institutional investors. They prefer discretion, similar to direct investments", he says.
REFIRE: Fondsbörse Private Markets’ latest study sends a clear message: the secondary market for special fund units is gaining traction, particularly in infrastructure and real estate sectors. But the gap between potential and reality remains wide. As Alex Gadeberg pointed out, the secondary market has “great growth potential,” but success will hinge on educating investors and familiarizing them with the mechanics of trading special fund units.
"As rising interest rates, regulatory changes, and shifting market dynamics continue to reshape the landscape, institutional investors who remain on the sidelines risk missing out on critical opportunities. Those who educate themselves and actively engage in secondary market trading stand to gain the flexibility and liquidity needed to navigate this new financial terrain. For those willing to dive in now, the rewards could be substantial.
